Nicola Mawson
Virgin Mobile is perhaps South Africa’s best known mobile virtual network operator (MVNO) – not only because of the home company’s charismatic CEO – but also due to the waves it made when it launched in 2006 before seemingly fading from existence.
Recently, two new companies have entered this space, targeting different demographics yet seeing a space for them to own a share of a market that, at first glance, may seem congested.
In August, SIM-only offering C-CONNECT announced its arrival with offer of prepaid deals that reward users with 10% back (Cha-Ching) whenever they buy airtime that can be used on items such as electricity vouchers.
Melon Mobile snuck into the market about 18 months ago, advertising itself on billboards, before an official media launch towards the end of October. It targets the middle class through providing customised deals as well as no-nonsense service, said Calvin Collett, Founder and CEO of Melon Mobile.
Collet said only 3.6% of the SIM card market is currently with MVNOs, with space to grow.
“I see the reset point in the market as having come about 18 months ago,” he said.
Melon Mobile is targeting as much as 1% of the market, Collett told Business Report, and is on track.
C-CONNECT COO, Richard Anderson, speaking at the launch, said that the company would market itself differently, which was where other offerings went wrong.
“Our brand is funky and vibrant to connect with customers,” Anderson said.
Peter Takaendesa, head of equities at Mergence Investment Managers, said MVNOs will all have to find their niche when it comes to the right market fit, which includes offering value for money, “if they are to make any difference in the market.”
Pointing out that, in the UK, MVNOs accounted for 20% of the subscriber base, Takaendesa said that “you can expect the mobile network operators to fight back aggressively at some point if MVNOs reach anywhere closer to 10% active customer market share”.
Takaendesa explained that recent regulatory changes and market dynamics have helped drive the sector due to improved economics for MVNOs.
He said the major regulatory driver was that mobile network operators, as part of recent spectrum allocations, now must provide MVNO and roaming services to other operators.
However, said Takaendesa, “the real major enabler has been the additional spectrum allocations and large network investments by the large mobile operators over the past few years,” without which MVNOs “would just be a dream”.
Veteran industry analyst, Adrian Schofield, said, of the 33 MVNOs that have launched in South Africa since the advent of cellular services in 1994, there are only 17 left. These include those from brands such as Capitec, FNB, Standard Bank, Pick n Pay, Mr Price, and Shoprite, all of which use their existing customer base to scale.
Schofield added that Virgin Mobile, which characteristically tries to cash in on high value products for high value clients, failed to move far enough down market to achieve the volumes needed for success.
“A couple of research houses are predicting that there will be 10 million or more MVNO users by 2030, up from about 4 million now,” said Schofield.
It appears that the added value of a mobile connection supplied through a trusted brand without having to go through the hoops of creditworthiness and long contracts typically seen in the industry is a drawcard for MVNOs, said Schofield.
There seem to be three predominant types of branded MVNO: banks, retailers and others, Schofield pointed out. Banks leverage connectivity to provide multiple services through the platform with each additional service increasing revenue, he said.
Retailers, Schofield noted, can improve their knowledge of their clients, improve their management of credit and increase brand loyalty. In what he calls the “other” group, WOW is providing a range of services to taxi commuters in Eastern Cape and can quickly expand to other areas.
“Is it a wave? Yes. Is it sustainable? Only if the South African economy can pick itself up, dust itself off and start all over again,” Schofield said.
“Imagine how poor the quality of life would be here, if we hadn't had the enabling effect of mobile communications and value-added services.”
BUSINESS REPORT